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City Site - Infrastructure bids on the runway


THE EMERGENCE of plans by Spanish construction group Ferrovial to launch a bid for the airports operator BAA has underlined the attractions of British infrastructure assets to foreign companies.

The airports company might be in a politically charged sector but the certainty that BAA provides of long-term revenues and reasonable growth prospects at relatively low cost has tempted the Spanish.

Port operator P&O, which is in the process of being acquired by Dubai's DP World , offers some similar attractions.

And if British infrastructure is in fashion, it should be positive for companies which build and operate it. It was notable that Carillion's share price rose 17p to 334p on the day of the BAA bid.

As one of Spain's largest contractors (it bought Amey three year ago) Ferrovial has frequently been mentioned as a potential suitor for major UK contractors. Given its interest in BAA, that is hardly likely to be the case now, although any bid may well serve to keep the PFI assets of the major contractors in the limelight. Their appeal to companies seeking to match long-term pension liabilities with a reliable asset base remains st rong.

As one of the UK construction industry's largest private sector clients, spending £4.2 billion at Terminal 5 alone, BAA's future ownership is a natural concern for the industry. The airport group's future capital spending plans, which include the £2.7 billion scheme to expand Stansted, will come under scrutiny as any bid unfolds.

But the construction industry must be hopeful that the regulator will insist on any new owner of the airport group maintaining the investment programme.

Perhaps the most striking aspect of the Ferrovial proposition is the sheer ambition of the project. The Spanish company is considering making a hostile bid for a foreign group four times its size in an uncertain regulatory regime.

How many UK contractors would contemplate doing that?